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This document provides an overview of Enterprise Resource Planning (ERP) systems in 3 paragraphs. ERP systems integrate important business functions like planning, purchasing, inventory, sales, marketing, finance, and human resources. They provide a common way for different departments to communicate and share information. ERP software manages data from activities like product planning, manufacturing, marketing, inventory, and finance. It provides an integrated view of core business processes in real-time using common databases. The document then lists some key components and functional areas that typical ERP systems include.
This document provides an overview of Enterprise Resource Planning (ERP) systems in 3 paragraphs. ERP systems integrate important business functions like planning, purchasing, inventory, sales, marketing, finance, and human resources. They provide a common way for different departments to communicate and share information. ERP software manages data from activities like product planning, manufacturing, marketing, inventory, and finance. It provides an integrated view of core business processes in real-time using common databases. The document then lists some key components and functional areas that typical ERP systems include.
This document provides an overview of Enterprise Resource Planning (ERP) systems in 3 paragraphs. ERP systems integrate important business functions like planning, purchasing, inventory, sales, marketing, finance, and human resources. They provide a common way for different departments to communicate and share information. ERP software manages data from activities like product planning, manufacturing, marketing, inventory, and finance. It provides an integrated view of core business processes in real-time using common databases. The document then lists some key components and functional areas that typical ERP systems include.
Enterprise Resource Planning - ERP A process by which a company (often a manufacturer) manages and integrates the important parts of its business. An ERP management information system integrates areas such as planning, purchasing, inventory, sales, marketing, finance, human resources, etc.
ERP is most frequently used in the context of software. As the methodology has become more popular, large software applications have been developed to help companies implement ERP in their organization. Think of ERP as the glue that binds the different computer systems for a large organization. Typically each department would have their own system optimized for that division's particular tasks. With ERP, each department still has their own system, but they can communicate and share information easier with the rest of the company.
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Enterprise resource planning (ERP) is business management softwareusually a suite of integrated applicationsthat a company can use to collect, store, manage and interpret data from many business activities, including:- Product planning, cost and development Manufacturing or service delivery Marketing and sales Inventory management Shipping and payment ERP provides an integrated view of core business processes, often in real-time, using common databases maintained by a database management system. ERP systems track business resourcescash, raw materials, production capacityand the status of business commitments: orders, purchase orders, and payroll. The applications that make up the system share data across the various departments (manufacturing, purchasing, sales, accounting, etc.) that provide the data. ERP facilitates information flow between all business functions, and manages connections to outside stakeholders. Enterprise system software is a multi-billion dollar industry that produces components that support a variety of business functions. IT investments have become the largest category of capital expenditure in United States-based businesses over the past decade. Though early ERP systems focused on large enterprises, smaller enterprises increasingly use ERP systems. 4
The ERP system is considered a vital organizational tool because it integrates varied organizational systems and facilitates error-free transactions and production. However, ERP system development is different from traditional systems development. ERP systems run on a variety of computer hardware and network configurations, typically using a databases an information repository
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History Origin of "ERP" In 1990, Gartner Group first used the acronym ERP
as an extension of material requirements planning (MRP), later manufacturing resource planning and computer-integrated manufacturing. Without replacing these terms, ERP came to represent a larger whole that reflects the evolution of application integration beyond manufacturing. Not all ERP packages developed from a manufacturing core. Vendors variously began with accounting, maintenance, and human resources. By the mid1990s ERP systems addressed all core enterprise functions. Governments and nonprofit organizations also began to use ERP systems.
A screenshot of an ERP software application
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Expansion ERP systems experienced rapid growth in the 1990s, because the year 2000 problem and introduction of the euro disrupted legacy systems. Many companies took the opportunity to replace their old systems with ERP. ERP systems initially focused on automating back office functions that did not directly affect customers and the general public. Front office functions, such as customer relationship management (CRM), dealt directly with customers, or ebusiness systems such as ecommerce, egovernment, etelecom, and efinanceor supplier relationship management(SRM) became integrated later, when the Internet simplified communicating with external parties. "ERP II" was coined in 2000 in an article by Gartner Publications entitled ERP Is Dead Long Live ERP II. It describes webbased software that provides realtime access to ERP systems to employees and partners (such as suppliers and customers). The ERP II role expands traditional ERP resource optimization and transaction processing. Rather than just manage buying, selling, etc.ERP II leverages information in the resources under its management to help the enterprise collaborate with other enterprises. ERP II is more flexible than the first generation ERP. Rather than confine ERP system capabilities within the organization, it goes beyond the corporate walls to interact with other systems. Enterprise application suite is an alternate name for such systems. Developers now make more effort to integrate mobile devices with the ERP system. ERP vendors are extending ERP to these devices, along with other business applications. Technical stakes of modern ERP concern integrationhardware, applications, networking, supply chains. ERP now covers more functions and rolesincluding decision making, stakeholders' relationships, standardization, transparency, globalization, etc.
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Characteristics ERP (Enterprise Resource Planning) systems typically include the following characteristics: An integrated system that operates in (or near) real time without relying on periodic updates A common database that supports all applications A consistent look and feel across modules Installation of the system with elaborate application/data integration by the Information Technology (IT) department, provided the implementation is not done in small steps
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Functional Areas An ERP system covers the following common functional areas. In many ERP systems these are called and grouped together as ERP modules: Financial accounting: General ledger, fixed asset, payables including vouchering, matching and payment, receivables, cash application and collections, cash management, financial consolidation Management accounting: Budgeting, costing, cost management, activity based costing Human resources: Recruiting, training, rostering, payroll, benefits, 401K, diversity management, retirement, separation Manufacturing: Engineering, bill of materials, work orders, scheduling, capacity, workflow management, quality control, manufacturing process, manufacturing projects, manufacturing flow, product life cycle management Order Processing: Order to cash, order entry, credit checking, pricing, available to promise, inventory, shipping, sales analysis and reporting, sales commissioning. Supply chain management: Supply chain planning, supplier scheduling, product configurator, order to cash, purchasing, inventory, claim processing, warehousing (receiving, putaway, picking and packing). Project management: Project planning, resource planning, project costing, work breakdown structure, billing, time and expense, performance units, activity management Customer relationship management: Sales and marketing, commissions, service, customer contact, call center support - CRM systems are not always considered part of ERP systems but rather Business Support systems (BSS). Data services : Various "selfservice" interfaces for customers, suppliers and/or employees.
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Components Transactional database Management portal/dashboard Business intelligence system Customizable reporting Resource planning and scheduling Analyzing the product External access via technology such as web services Search Document management Messaging/chat/wiki Workflow management
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Best Practices Most ERP systems incorporate best practices. This means the software reflects the vendor's interpretation of the most effective way to perform each business process. Systems vary in how conveniently the customer can modify these practices. Companies that implemented industry best practices reduced timeconsuming project tasks such as configuration, documentation, testing, and training. In addition, best practices reduced risk by 71% compared to other software implementations. Use of best practices eases compliance with requirements such as IFRS, Sarbanes-Oxley, or Basel II. They can also help comply with de facto industry standards, such as electronic funds transfer. This is because the procedure can be readily codified within the ERP software, and replicated with confidence across multiple businesses who share that business requirement.
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Connectivity to plant floor information ERP systems connect to realtime data and transaction data in a variety of ways. These systems are typically configured by systems integrators, who bring unique knowledge on process, equipment, and vendor solutions. Direct integration ERP systems have connectivity (communications to plant floor equipment) as part of their product offering. This requires that the vendors offer specific support for the plant floor equipment their customers operate. ERP vendors must be experts in their own products and connectivity to other vendor products, including those of their competitors. Database integration ERP systems connect to plant floor data sources through staging tables in a database. Plant floor systems deposit the necessary information into the database. The ERP system reads the information in the table. The benefit of staging is that ERP vendors do not need to master the complexities of equipment integration. Connectivity becomes the responsibility of the systems integrator. Enterprise appliance transaction modules (EATM) These devices communicate directly with plant floor equipment and with the ERP system via methods supported by the ERP system. EATM can employ a staging table, Web Services, or systemspecific program interfaces (APIs). An EATM offers the benefit of being an offtheshelf solution. Customintegration solutions Many system integrators offer custom solutions. These systems tend to have the highest level of initial integration cost, and can have a higher long term maintenance and reliability costs. Long term costs can be minimized through careful system testing and thorough documentation. Customintegrated solutions typically run on workstation or server-class computers.
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Implementation ERP's scope usually implies significant changes to staff work processes and practices. [
Generally, three types of services are available to help implement such changesconsulting, customization, and support. Implementation time depends on business size, number of modules, customization, the scope of process changes, and the readiness of the customer to take ownership for the project. Modular ERP systems can be implemented in stages. The typical project for a large enterprise takes about 14 months and requires around 150 consultants. Small projects can require months; multinational and other large implementations can take years Customization can substantially increase implementation times. Besides that, information processing influences various business functions e.g. some large corporations like Wal-Mart use a just in time inventory system. This reduces inventory storage and increases delivery efficiency, and requires up-to-date-data. Before 2014, Walmart used a system called Inforem developed by IBM to manage replenishment.
An ERP accounting software 13
Process preparation Implementing ERP typically requires changes in existing business processes. Poor understanding of needed process changes prior to starting implementation is a main reason for project failure. The problems could be related to the system, business process, infrastructure, training, or lack of motivation. It is therefore crucial that organizations thoroughly analyze business processes before they implement ERP software. Analysis can identify opportunities for process modernization. It also enables an assessment of the alignment of current processes with those provided by the ERP system. Research indicates that risk of business process mismatch is decreased by: Linking current processes to the organization's strategy Analyzing the effectiveness of each process Understanding existing automated solutions ERP implementation is considerably more difficult (and politically charged) in decentralized organizations, because they often have different processes, business rules, data semantics, authorization hierarchies, and decision centers. This may require migrating some business units before others, delaying implementation to work through the necessary changes for each unit, possibly reducing integration (e.g., linking via Master data management) or customizing the system to meet specific needs. A potential disadvantage is that adopting "standard" processes can lead to a loss of competitive advantage. While this has happened, losses in one area are often offset by gains in other areas, increasing overall competitive advantage.
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Configuration Configuring an ERP system is largely a matter of balancing the way the organization wants the system to work with the way it was designed to work. ERP systems typically include many settings that modify system operation. For example, an organization can select the type of inventory accountingFIFO or LIFOto use; whether to recognize revenue by geographical unit, product line, or distribution channel; and whether to pay for shipping costs on customer returns.
Ascent ERP Software
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Two tier enterprise resource planning Two-tier ERP software and hardware lets companies run the equivalent of two ERP systems at once: one at the corporate level and one at the division or subsidiary level. For example, a manufacturing company
uses an ERP system to manage across the organization. This company uses independent global or regional distribution, production or sales centers, and service providers to support the main companys customers. Each independent center or subsidiary may have its own business models, workflows, and business processes. Given the realities of globalization, enterprises continuously evaluate how to optimize their regional, divisional, and product or manufacturing strategies to support strategic goals and reduce time-to-market while increasing profitability and delivering value. With two-tier ERP, the regional distribution, production, or sales centers and service providers continue operating under their own business modelseparate from the main company, using their own ERP systems. Since these smaller companies' processes and workflows are not tied to main company's processes and workflows, they can respond to local business requirements in multiple locations. Factors that affect enterprises adoption of two-tier ERP systems include: Manufacturing globalization, the economics of sourcing in emerging economies Potential for quicker, less costly ERP implementations at subsidiaries, based on selecting software more suited to smaller companies Extra effort, (often involving the use of Enterprise application integration) is required where data must pass between two ERP systems.
Two-tier ERP strategies give enterprises agility in responding to market demands and in aligning IT systems at a corporate level while inevitably resulting in more systems as compared to one ERP system used throughout the organization.
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Customization ERP systems are theoretically based on industry best practices, and their makers intend that organizations deploy them as is. ERP vendors do offer customers configuration options that let organizations incorporate their own business rules, but often feature gaps remain even after configuration is complete. ERP customers have several options to reconcile feature gaps, each with their own pros/cons. Technical solutions include rewriting part of the delivered software, writing a homegrown module to work within the ERP system, or interfacing to an external system. These three options constitute varying degrees of system customizationwith the first being the most invasive and costly to maintain. Alternatively, there are non-technical options such as changing business practices or organizational policies to better match the delivered ERP feature set. Key differences between customization and configuration include: Customization is always optional, whereas the software must always be configured before use (e.g., setting up cost/profit center structures, organizational trees, purchase approval rules, etc.). The software is designed to handle various configurations, and behaves predictably in any allowed configuration. The effect of configuration changes on system behavior and performance is predictable and is the responsibility of the ERP vendor. The effect of customization is less predictable. It is the customer's responsibility, and increases testing activities. Configuration changes survive upgrades to new software versions. Some customizations (e.g., code that uses predefined "hooks" that are called before/after displaying data screens) survive upgrades, though they require retesting. Other customizations (e.g., those involving changes to fundamental data structures) are overwritten during upgrades and must be reimplemented.
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Customization advantages include that it: Improves user acceptance Offers the potential to obtain competitive advantage vis--vis companies using only standard features Customization disadvantages include that it: Increases time and resources required to implement and maintain Inhibits seamless communication between suppliers and customers who use the same ERP system uncustomized Can create over reliance on customization, undermining the principles of ERP as a standardizing software platform
Recording a sales order in an ERP software 18
Extensions ERP systems can be extended with thirdparty software. ERP vendors typically provide access to data and features through published interfaces. Extensions offer features such as: Archiving, reporting, and republishing Capturing transactional data, e.g., using scanners, tills or RFID Access to specialized data and capabilities, such as syndicated marketing data and associated trend analytics Advanced planning and scheduling (APS) Managing resources, facilities, and transmission in real-time
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Data migration Data migration is the process of moving, copying, and restructuring data from an existing system to the ERP system. Migration is critical to implementation success and requires significant planning. Unfortunately, since migration is one of the final activities before the production phase, it often receives insufficient attention. The following steps can structure migration planning: Identify data to migrate Determine migration timing Generate data templates Freeze the toolset Decide on migration-related setups Define data archiving policies and procedures
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Advantages of ERP The fundamental advantage of ERP is that integrating myriad businesses processes saves time and expense. Management can make decisions faster and with fewer errors. Data becomes visible across the organization. Tasks that benefit from this integration include: Sales forecasting, which allows inventory optimization. Chronological history of every transaction through relevant data compilation in every area of operation. Order tracking, from acceptance through fulfillment Revenue tracking, from invoice through cash receipt Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced) Complete visibility into all the important processes, across various departments of an organization (especially for senior management personnel). Automatic and coherent workflow from one department/function to another, to ensure a smooth transition and quicker completion of processes. This also ensures that all the inter-departmental activities are properly tracked and none of them is missed out. A unified and single reporting system to analyze the statistics/status etc. in real-time, across all functions/departments. Certain ERP vendors can extend their ERP systems to provide Business Intelligence functionalities that can give overall insights on business processes and identify potential areas of problems/improvements. Advanced e-commerce integration is possible with ERP systems most of them can handle web-based order tracking/ processing. Since ERP is a modular software system, its possible to implement either a few modules (or) many modules based on the requirements of an organization. If more modules implemented, the integration between various departments may be better. 21
Since a Database system is implemented on the backend to store all the information required by the ERP system, it enables centralized storage/back-up of all enterprise data. ERP systems are more secure as centralized security policies can be applied to them. All the transactions happening via the ERP systems can be tracked. ERP systems provide better company-wide visibility and hence enable better/faster collaboration across all the departments. It is possible to integrate other systems (like bar-code reader, for example) to the ERP system through an API (Application Programming Interface). ERP systems make it easier for order tracking, inventory tracking, revenue tracking, sales forecasting and related activities. ERP systems centralize business data, which: Eliminates the need to synchronize changes between multiple systemsconsolidation of finance, marketing, sales, human resource, and manufacturing applications Brings legitimacy and transparency to each bit of statistical data Facilitates standard product naming/coding Provides a comprehensive enterprise view (no "islands of information"), making real time information available to management anywhere, any time to make proper decisions Protects sensitive data by consolidating multiple security systems into a single structure.
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Benefits ERP can improve quality and efficiency of the business. By keeping a company's internal business processes running smoothly, ERP can lead to better outputs that may benefit the company, such as in customer service and manufacturing. ERP supports upper level management by providing information for decision making. ERP creates a more agile company that adapts better to change. ERP makes a company more flexible and less rigidly structured so organization components operate more cohesively, enhancing the businessinternally and externally. ERP can improve data security. A common control system, such as the kind offered by ERP systems, allows organizations the ability to more easily ensure key company data is not compromised. ERP provides increased opportunities for collaboration. Data takes many forms in the modern enterprise. Documents, files, forms, audio and video, emails. Often, each data medium has its own mechanism for allowing collaboration. ERP provides a collaborative platform that lets employees spend more time collaborating on content rather than mastering the learning curve of communicating in various formats across distributed systems.
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Disadvantages of ERP Customization is problematic. Compared to the best-of-breed approach, ERP can be seen as meeting an organizations lowest common denominator needs, forcing the organization to find workarounds to meet unique demands. Re-engineering business processes to fit the ERP system may damage competitiveness or divert focus from other critical activities. ERP can cost more than less integrated or less comprehensive solutions. High ERP switching costs can increase the ERP vendor's negotiating power, which can increase support, maintenance, and upgrade expenses. Overcoming resistance to sharing sensitive information between departments can divert management attention. The cost of ERP Software, planning, customization, configuration, testing, implementation, etc. is too high. ERP deployments are highly time-consuming projects may take 1-3 years (or more) to get completed and fully functional. Too little customization may not integrate the ERP system with the business process & too much customization may slow down the project and make it difficult to upgrade. The cost savings/payback may not be realized immediately after the ERP implementation & it is quite difficult to measure the same. The participation of users is very important for successful implementation of ERP projects hence, exhaustive user training and simple user interface might be critical. But ERP systems are generally difficult to learn (and use). There may be additional indirect costs due to ERP implementation like new IT infrastructure, upgrading the WAN links, etc. Migration of existing data to the new ERP systems is difficult (or impossible) to achieve. Integrating ERP systems with other stand alone software systems is equally difficult (if possible). These activities may consume a lot of time, Money & resources, if attempted. 24
ERP implementations are difficult to achieve in decentralized organizations with disparate business processes and systems. Once an ERP systems is implemented it becomes a single vendor lock-in for further upgrades, customizations etc. Companies are at the discretion of a single vendor and may not be able to negotiate effectively for their services. Evaluation prior to implementation of ERP system is critical. If this step is not done properly and experienced technical/business resources are not available while evaluating, ERP implementations can (and have) become a failure. Integration of truly independent businesses can create unnecessary dependencies. Extensive training requirements take resources from daily operations. Due to ERP's architecture (OLTP, On-Line Transaction Processing) ERP systems are not well suited for production planning and supply chain management (SCM). Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time, planning, and money. Recognized ERP limitations have sparked new trends in ERP application development. Development is taking place in four significant areas: more flexible ERP, Web-enabled ERP, inter-enterprise ERP, and e-business suites.
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Proprietary ERP Software List 1C:Enterprise from 1C Company 24SevenOffice Start, Premium, Professional and Custom from 24SevenOffice abas Business Software from ABAS Software AG Access SupplyChain from the Access Group Activant acquired by Epicor Acumatica Cloud ERP from Acumatica AddonSoftware from BASIS International Agresso Business World from Unit4 AIVA 9001 from AIVA SISTEMA AXIS ERP from Consona Corporation BatchMaster ERP from BatchMaster Software CGI Advantage from CGI Group (formerly American Management Systems) CGram Enterprise from CGram Software Cimnet Systems from Consona Corporation Ciright ERP from Ciright Systems COA Solutions Ltd - Smart Business Suite Coda Financials from Unit4 Comarch Altum from Comarch Comarch Semiramis from Comarch Compass ERP from Transtek Compiere professional edition from Consona Corporation DEACOM ERP from Deacom ebizframe ERP from Eastern Software Systems EFACS from Exel Computer Systems and RAD Software. Encompix ERP from Consona Corporation ENFOS EnterpriseIQ from IQMS Log-net from LOG-NET, Inc. Maximo (MRO) from IBM Made2Manage ERP from Consona Corporation MECOMS from Ferranti Computer Systems Microsoft Dynamics AX (formerly Axapta) from Microsoft Microsoft Dynamics GP (formerly Great Plains) from Microsoft Microsoft Dynamics NAV (formerly Navision) from Microsoft Microsoft Dynamics SL (formerly Solomon) from Microsoft Momentum from CGI Group mySAP from SAP MyWorkPLAN from Sescoi NAV-X from Microsoft and NAV-X LLC NetSuite from NetSuite Inc. Openda QX from Openda OpenMFG from xTuple Opera (I, II and 3) from Pegasus Software Oracle E-Business Suite from Oracle Oracle Fusion from Oracle OSAS from Open Systems Accounting Software PeopleSoft from Oracle Plex Online from Plex Systems ProfitKey from ProfitKey International Pronto Software from Pronto Software Prophet 21 from Epicor Quintiq QAD Enterprise Applications (formerly MFG/Pro) from QAD Inc Ramco Enterprise Series 4.x from Ramco Systems Ramco e.Applications from Ramco Systems Ramco On Demand ERP from Ramco Systems Rapid Response Manufacturing from ProfitKey International TeamWox from MetaQuotes Software corp. Sage PFW ERP from Sage Group Sage Pro ERP from Sage Group Sage 100 ERP (formerly Sage ERP MAS 90 and 200) from Sage Group Sage 300 ERP (formerly Accpac) from Sage Group Sage 500 ERP from Sage Group Sage ERP X3 from Sage Group SAP Business All-in-One from SAP SAP Business ByDesign from SAP SAP Business One from SAP SAP Business Suite from SAP SohoOS SYSPRO from Syspro Tally.ERP 9 from Tally Solutions Technology One from Technology One 26
Epicor Enterprise from Epicor Epicor ERP from Epicor Retail ERP from Erply Exact MAX from Exact Software Exact Macola ES from Exact Software Exact Globe Next from Exact Software Exact Online from Exact Software Financial Force ERP from FinancialForce.com Fishbowl Inventory from Fishbowl Greentree Business Software from Greentree International IFS Applications from Industrial and Financial Systems Ignition MES and OEE Module Inductive Automation Infor10 Barcode from Infor Global Solutions Infor10 Discrete iEnterprise (XA) (aka MAPICS) from Infor Global Solutions Infor10 Distribution Business (aka SX.Enterprise) from Infor Global Solutions Infor10 Distribution Express (aka FACTS) from Infor Global Solutions Infor10 ERP Business (aka SyteLine) from Infor Global Solutions Infor10 ERP Ln (formerly Baan ERP, Baan IV and Triton) from Infor Global Solutions Infor VISUAL (formerly known as VISUAL Manufacturing, VISUAL Enterprise, Infor VISUAL ERP) from Infor Global Solutions Infor10 ERP Process Business (aka Adage) from Infor Global Solutions Infor ERP Blending (aka BLENDING) from Infor Global Solutions Intacct Intacct and Intacct Accountant Edition Intuitive ERP from Consona Corporation JD Edwards EnterpriseOne from Oracle JD Edwards World from Oracle Jeeves from Jeeves Information Systems AB JustFoodERP from IndustryBuilt Software Corp. kVASy4 from SIV.AG TradeXpress from TradeCard TRAVERSE from Open Systems Accounting Software UFIDA NC from UFIDA UFIDA ERP-U8 All-in-one from UFIDA UFIDA U9 from UFIDA Visibility.net from Visibility Workday from Workday, Inc. WorkPLAN Enterprise from Sescoi
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ERP for Information Technology Enterprise Resource Planning for Information Technology (ERP for IT, or ERP4IT) describes the automation of information technology (IT). Therefore ERP4IT focuses on the automated IT itself and not on the automation of business processes by IT Accordingly, an entire ERP for IT approach and adequate solutions touch various IT disciplines such as: Application Lifecycle Management (ALM) Project Portfolio Management IT Governance IT Service Management (ITSM) Application Performance Management (APM) Business Activity Monitoring (BAM) Enterprise Architecture Management (EAM) Service-Oriented Architecture (SOA) IT Asset Management (ITAM) Information Security Knowledge Management Enterprise Content Management (ECM) Business Service Management (BSM) The term Enterprise Resource Planning (ERP) might be a little confusing because of the way it is used for business solutions. Enterprise resource planning software is software that can comprehensively manage the needs of a major enterprise resource area (money, productive capital, people, stock of goods or information). Of the major resource areas, only information (i.e. IT) lacks integrated vendor solutions such as those offered by SAP ERP or Oracle E- Business Suite for all the other resource areas.
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Respectively, ERP4IT focuses on a broader sense as well as on the comprehensive integration of different modules like the ERP system do. ERP4IT provides a process centric solution in complex information structures, implemented in relational databases for the IT organization to manage the IT itself. Due to the given complexity of the domains involved, IT services should become transparent and enable the IT to manage organizational and technical dependencies. ERP4IT shows the cost but also the benefit of the provided services. They should be measurable and contribute as single parts to the overall business vision and strategy. With the right foundation on industry standards, a de facto, federated, ERP4IT solution could start to emerge - that would radically improve the efficiency of enterprise IT Many companies have a wide range of nonintegrated solutions covering several aspects of IT Governance such as: Project Management, Portfolio Management, Time Management, Service Management, Enterprise Architecture, System Management, Security Management or Asset Management. Unfortunately, to this day there are no known standards for such an integrative overall solution that supports what the emerging subject of ERP4IT claims to be. In the past there have been several proprietary attempts to solve various pieces of the IT puzzle.) In Europe, ERP for IT and ERP4IT are registered community trademarks of Efecte Corp.
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ERP System Selection Methodology Software selection starts with an understanding of Critical Success Factors (CSFs) which is defined as those things an organization we must do well in order to be successful. By facilitating a management/executive meeting where the CSFs are identified as well as the key requirements and Key Performance Indicators (KPIs). There are many ways to achieve CSFs but the focus is through systems. An ERP system selection methodology is a formal process for selecting an enterprise resource planning (ERP) system. Existing methodologies include: SpecIT Independent Vendor Selection Management Kuiper's funnel method Dobrin's 3D decision support tool Clarkson Potomac method An overview of system selection: Irrespective of whether the company is a multi-national, multi-million dollar organization or a small company with single digit million turnover, the goal of system selection is to source a system that can provide functionality for all of the business processes; that will get complete user acceptance; management approval and, most importantly, can provide significant return on investment for the shareholders. Since the mid-1970s, when there was widespread introduction of computer packages into leading companies to assist in material requirements planning software companies have striven, and for the most part succeeded, to create packages that assist in all aspects of running a business from manufacturing; supply chain management; human resources; through to financials. This led to the evolution of ERP Systems. Accordingly, a significant number of packages purporting to be ERP systems have entered into the marketplace since 1990. There are packages at the upper end of the market and a vast quantity of other packages that vendors claim to be ERP Systems. There are also packages that claim to be best of breed for certain processes [such as 30
planning] and sold merely as an add-on to an ERP System. The options are many and this, in reality, creates a problem for the company who has to make a decision. Attempting to select an ERP system is further exacerbated by the fact that some systems are geared for discrete manufacturing environment where a distinct amount of items make up a finished product while others are more suited to process industries such as chemical and food processing where the ingredients are not exact and where there might be re-work and byproducts of a process. In the last decade, companies have also become interested in enhanced functionality such as customer relationship management and electronic commerce capability. Given all of the potential solutions, it is not uncommon for companies to choose a system that is not the best fit for the business and this normally leads to a more expensive implementation. Thus "ERP Costs can run as high as two or three percent of revenues". A proper ERP system selection methodology will deliver, within time and budget, an ERP system that is best fit for the business processes and the user in an enterprise. It is used in small scale Enterprises for implement their organization towards the MIS.
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Proper System Selection Methodology To address the common mistakes that lead to a poor system selection it is important to apply key principles to the process, some of which are listed hereunder: Structured approach The first step in selection of a new system is to adopt a structured approach to the process. The set of practices are presented to all the stakeholders within the enterprise before the system selection process begins. Everyone needs to understand the method of gathering requirements; invitation to tender; how potential vendors will be selected; the format of demonstrations and the process for selecting the vendor. Thus, each stakeholder is aware that the decision will be made on an objective and collective basis and this will always lead to a high level of co-operation within the process. Focused demonstrations Demonstrations by potential vendors must be relevant to the business. However, it is important to understand that there is considerable amount of preparation required by vendors to perform demonstrations that are specific to a business. Therefore it is imperative that vendors are treated equally in requests for demonstrations and it is incumbent on the company [and the objective consultant assisting the company in the selection process] to identify sufficient demonstrations that will allow a proper decision to be made but will also ensure that vendors do not opt out of the selection process due to the extent of preparation required. Objective decision process "Choosing which ERP to use is a complex decision that has significant economic consequences, thus it requires a multi-criterion approach." There are two key points to note when the major decision makers are agreeing on selection criteria that will be used in evaluating potential vendors. Firstly, the criteria and the scoring system must be agreed in advance prior to viewing any potential systems. The criteria must be wide-ranging and decided upon by as many objective people as possible within and external to the enterprise. In no circumstance should people with affiliations to one or more systems be allowed to advise in this regard.
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Full involvement by all personnel The decision on the system must be made by all stakeholders within the enterprise. "It requires top management leadership and participation it involves virtually every department within the company".
Representatives of all users should: Be involved in the project initiation phase where the decision making process is agreed; Assist in the gathering of requirements; Attend the Vendor Demonstrations; Have a significant participation in the short-listing and final selection of a vendor.